I have some vague memory of reading an essay by Sendak about In the Night Kitchen, but I've just been through a fruitless search on the internet. The interpretations of the book that I've found, though are:
1) Differentiation of self: "I'm not the milk and the milk's not me!" Basically your interpretation.
2) Something fuzzy and full of phallic/Freudian/sexual imagery involving both the extremely obvious and the slightly less so: free-flowing milk, for example.
In answer to your question, yes, In the Night Kitchen is still wildly popular, and Where the Wild Things Are is even more so. Which brings me back to that stupid New York Times article on picture books. No, sales of picture books are not down at our stores in the D.C. area -- although we're in an area which has not been as badly affected by the economic mess as many other places. I believe that picture books will be the last type of book to be affected by the current digital revolution. Long after 12 year-olds are reading their middle-grade novels on kindles, grown-ups will still be buying physical books with real pages and great pictures to read to their little ones. I hope.
Some newly-published picture books -- like any other genre, for children or adults -- don't sell. That's the nature of the business. Publishers winnow down many submissions to the few hundred they offer to bookstores in a season. The book buyers choose a small percentage of those to bring into their stores (I went through about 20 sample picture books from Scholastic today and have settled on three that I'll offer to our customers next spring). Then the end users -- moms, dads, grandparents, aunts, uncles, loving friends -- come into the store and maybe look at some of those new ones, or maybe just go for In the Night Kitchen for that special kid. So some of the books I like don't make the cut. And some catch on and become part of our more or less permanent collection. No store can guess right all the time.
And of course one of the pleasures of going to a book store or a library is choice. That's what browsing is all about -- sampling and choosing.
The new store opened last week, by the way. More on that another day.